Conclusion: The Mortgage Brokers Association reported that demand for loans to purchase homes sank to a 13-year low last week, which bodes poorly for demand and future price.
Josh Steiner and his team held a very thorough and thoughtful call on the U.S. housing market a few weeks ago (if you aren’t currently getting his Financial Sector Research, please email Jen Kane at ). Their conclusion was simply that consensus is not bearish enough on the next move in housing prices in the U.S.
The data points today from the Mortgage Bankers Association is another important supporting point in the Hedgeye Mosaic as it relates to our bearish view on housing. According to the survey, request for loans to purchase houses dropped 3.1% on a week-over-week basis in the week ending July 9th, which is adjusted for the holiday. Demand for refinancing fell similarly, and was down 2.9% on a week-over-week basis.
This was the lowest reading in this survey since December 1996. Just as a reminder, the prime interest rate, a proxy for where mortgage interest rates are at generally, was at 8.25% then versus today’s 3.25%.
If you are a housing bull today, you have to ask yourselves this: If people aren’t buying houses at all time lows in mortgage rates, when will they?
The obvious answer is when prices go lower. By a lot.
Daryl G. Jones